Who wins and who loses when wealth and decision making
are concentrated
in large, global companies? How can we humanize globalization?
William Greider
Keynote Address
Wednesday, October 9th, 2002
Capital Ownership Group Conference
Washington, D.C.
Basically,
I was arguing that the global system is headed toward some kind of crisis
unless it changes. And that was an
argument really based on old fashioned analysis of production, supply and
overcapacity and stuff that most economists don=t spend much time with any more.
Let
me give you a little bit of what I wrote in 1997.
AUnless
the fundamentals of capitalist enterprise have somehow been repealed, the system
cannot continue on its present trajectory, not without sooner or later facing a
substantial, perhaps sudden, adjustment in expectations in returns. To put it crudely, capital is being invested
in new factories to make more things when the market is already struggling with
a mounting shortage of buyers. One way
or another, losses will multiply for firms, nations, global investors. But when?
When the realization takes hold that the expected returns from these new
productive investments are grossly over-valued against the actual market
prospects. When the recognition takes
hold, it may induce a panicky rush to prudence.@
I
was trying to be a little droll, but that=s
not a bad description of where we are now.
The financial bubble that we experienced in the United States was, in
fact, worldwide. It was less extreme in
some markets than in others, but the same process of both over-investing and
over-expecting returns is now in the process of deflating. I don=t
want to dwell on this because it=s
not our subject, but I do want to say again, as the Chicken Little in the
crowd, we are in a very perilous moment.
It=s not going to hit with a thunder clap, but the
fundamentals are in place, leading us toward
flirting with the full catastrophe.
And by that, I mean a worldwide deflation which, when it happened 70
years ago, literally collapsed the global trading system. I surely hope that=s not the case now, but we=re all pretty powerless in the presence of these
portents because the people in power, both government and finance and
multi-national business, have got to move rather quickly to reverse their
long-held views and literally do the opposite, at least for a time, until we
move back from that cliff. And I=ll just be very blunt about this. The Federal Reserve needs to induce
inflation. The federal government needs
to run rather large and, one hopes, purposeful deficits, targeted at
stimulating the economy and, in one way or another, the government may also have
to directly help corporations and households liquidate their debt without going
bust. Again, I hope we don=t get to those remedies. Maybe I=m overstating the situation, but I=m impressed by the number of wise heads in finance who
are saying pretty much the same thing I just said, although covered over with
euphemisms so they don=t sound quite as shocking.
If
we get past this moment without great wreckage, then I think we do have a great opening. That=s
why this conference is laying groundwork for a lot of new engagement in
politics and in the society. People
will be able to see that the market fundamentalism of the last 20+ years not
only was wrong, but that it=s breaking
down, and there are other ways to think about the economy. In my very wishful moments, I see a politics
around globalization going on offense.
I=m with the folks in the streets with banners, and I
mean that sincerely, but I=m getting a
little tired of going to the IMF meetings and picketing David Ellerman at the
World Bank and other people like that when we really need to be in the
legislative halls. We need to put these
issues into American politics. I=ll just mention one example.
The
United States still has the sovereign power to legislate rules and regulations
concerning its own multi-national corporations. Some people will scream and holler Athat=s a WTO question and you can=t do that,@
but the last time I looked at the Constitution, the government still had that
power, and it needs to assert it. The
politics of doing that is horrendously difficult, we know, but as an
environmentalist friend told me once, Ayou=re never going to win a fight until you start a fight.@ I think we=re now on new ground here where some new fights can
get started that have a moral clarity that people at large, once they
understand the facts, will agree with us.
The
sweatshops are the clearest, most obvious place to begin. Some of my friends
who are putting together a movement -- a coalition -- of national scope to
insert the issue of sweatshops into the legislative arena. They would probably
a go a bit farther than I=m actually ready to go at this point, to simply ban
imports that originate in certain unsafe and despicable conditions. A more moderate approach would be to lay
down some rules for the multi-nationals on labor conditions, to require
reporting to the public, not just here but in those placing where they are
running factories and buying production.
The
easiest example to grasp is the right-to-know laws passed in the United States,
supported heavily by labor, to require companies to report toxic releases to
the public communities. What are they dumping in the water, the land, the
air? We all know that had a powerful
regulatory effect because local communities, once they=re armed with that information, went after the
companies and the regulatory agencies that were ignoring the problems. I think it=s a great tool for empowering people in some very forlorn places where
kids are working in terrible, unsafe factories, and the local folks have
absolutely no voice in their own politics, and we can help them and, at the
same time, begin to assert what has to be a long list of social standards and
values that are missing from globalization.
This
conference, I think, has the potential to go way beyond that. You are dealing
with ideas that have a potential to change the social arrangements in societies
that have the nerve and the wit and the energy to begin to work on new
relationships of ownership -- that literally will make organic changes in how
capitalism functions globally and at home.
Does
capitalism need fixing?
What
exactly is it that disturbs us about global capitalism or domestic capitalism,
for that matter? I=m going to do an outrageous plug here. But I=m
working on another book -- and I hope Deborah is already racing to the stores B but it=s
not out yet, and I haven=t even finished it, so wait. It=s going to be published next September, if I ever get
it finished, and is untitled, but the idea Areinventing
American capitalism@ or Athe path to a
moral economy. And I=m focusing on American Capitalism so as not to drown
readers in complexity, but also because I think American Capitalism has a lot
of catching up to do with other versions around the world. That=s
not the convenntional view in the US, of course, but it happens to be the
reality.
One
of the things I did in gathering material for this book was to go back to
earlier periods, before the Cold War, even well into the 19th
Century, and even before that. What did
people say as these formations were building -- major, dominant corporations
and the rules of property and so forth?
Of course, the past is teaming with great ideas. I read some people from the Social Gospel
movement of the 1920s and 30s who were mostly Protestant theologians and
ministers deeply offended by the way U.S. capitalism was functioning. They were
making a very harsh critique, some of them Socialist, some of them were simply
conservative ministers who, as Christians, were appalled by what they saw.
One
of those conservatives was a Swiss reform minister named the Reverend Emil
Brunner. This is what he said about
capitalism in his time:
AThe
system is contrary to the spirit of service.@ He meant Christian service. AIt is debased and irresponsible. Indeed, we may go further and say it is irresponsibility
developed into a system.@
That
stuck in my thinking and I realized that=s
true today, even more so: irresponsibility developed into a system. The multi-national corporation is
irresponsible to others, to its own employees, to society in ways we all
know. So are global investors as they
move in and out of economies. So are
the financial markets, unregulated mostly, that allow that sudden flow in and
out. But so are consumers, and the sweatshops are example of that. We are implicated in the cruelties toward,
even deaths of, workers in those places, because we buy what they make. Whether we know it or not, it=s at our doorstep, and it doesn=t take a highly refined sense of morality to
understand that we have the power to stop that, if we wish.
Managers
are irresponsible, many of them because they=re
trapped in the same system as the workers. And so, too, are the workers
irresponsible. And I mean that in a
slightly different way. They are
prohibited from taking responsibility, from participating in the decision
making. Indeed, in most work places,
they are treated as digits, as accounting variables in the work of the
firm. Powerless, treated more or less as
interchangeable commodities, inputs, factors of production. So I think the great organizing idea of this
conference, and a lot of your spent many years of your life working on this, is
to deny that -- to say that you can=t
have a responsible society unless you make workers somehow owners of the
capitalist enterprise. We know there
are many ways to do that, but the essence of it I think we all understand. This, too, is a very old idea. It came up in the early formations of
organized labor in the United States and in Europe, and elsewhere. At one time, it was even an idea advanced by
the progressive leaders of business. I=ve seen this quotation used in three or four books I=ve read, and I=m
going to use it in my own, so I must share it with you.
Owen
D. Young was a co-CEO of General Electric Company in the 20's and 30's when General
Electric was one of the enlightened and progressive reforming corporations in
America. And here=s what Mr. Young said. APerhaps some day we may be able to organize the human
beings in a particular undertaking, even in a corporation so that they truly
will be the employer buying capital as a commodity in the market. It will be necessary for them to provide an
adequate guarantee fund in order to buy the capital at all. If that is realized, the human beings will
be entitled to all the profits over the cost of capital. I hope that day may come when the great
business organizations will truly belong to the men [we would add women] who
are giving their lives and their efforts to them. I care not in what capacity.@
This
is the CEO of General Electric. General
Electric did not go down that road, as we know. They are now the model of the opposite. Systemic and rather brutal marginalization of workers, including
production to foreign countries, but also internal pressures B paranoia, I would say, having talked to a lot of GE
middle managers. This idea that workers
should have a piece of participation and influence and voice, whether it was
through stock shares or cooperatives, or however you managed it, is really the
road not taken by history. And I think
our challenge, literally, is to revive it and to popularize it, and to make it
real again for people. Marx would have
said it differently. AThe workers own the means of production.@ And I don=t want to reopen that argument, but Marxism didn=t really deliver that. The ownership belonged to the state and was controlled by the
state, not the workers, and indeed treated the workers more or less as digits,
as inputs, in much the same way that Western capitalism did.
Our
vision is larger. It=s a human vision, and it starts with this belief:
people are capable everywhere in the world.
If they can do the work of modern economic life, then they can and
should share fully in the rewards and the responsibilities. That means the burdens and the returns of
participating in the decision-making and governance of the place where they
work.
Broadening
ownership as the central reform
The
Cold War is over, and that=s a great
blessing if we can figure out how to take advantage of that. We don=t
have to re-argue those questions. And
we now do have some space to bring up what, not very long ago, sounded very
Bolshevik to some of our leading economists whenever you talked to them. And unlike earlier years, we have this idea
functioning successfully, here and elsewhere in the world. Things we can see and talk about and
measure. It=s not just a sort of airy/fairy dream. We have Mondragon that keeps coming back
into our consciousness. We have, what,
8 or 10 millions working in status of worker owners in one way or another. We have 11,000 employee-owned
companies. We have thousands, many
thousands B I didn=t
find a good number B of cooperatives, plus professional partnerships, plus
hybrid variations on all of those. I
don=t want to over-simplify or overstate this because many
of those, as we know, fall well sort of qualifying as a democratic firm. As John Logue has taught me, and I=m sure some of you, this is really hard to do. It=s
hard for the management, but it=s also hard for
the workers. And you can=t skip by that because, in addition to changing the
power relationships within the firm, the employees have to change
themselves. And whenever you=ve been in one of these situations, you recognize that
immediately. And you see what is just
natural in human society. Some people
are ready for change. They really are.
And they take the lead, if we=re
lucky, and they make it work, and they help the others come along. And some people, bless them, but they=ll never get it.
And I mean some managers will never get it and some workers on the line
will never get it, and some middle managers will never be able to see that
there=s a wider experience in their work open to them in a
changed system. But some do get it and, with experience, many do.
That
process of teaching yourself that you=re larger than you thought you were, or that you=re life has more possibility to it than you realized,
is probably the greatest human experience available -- and we can make that
unfold for people through political action or agitation of one kind or
another. I have to add, government can=t do this. You can=t
command it from above. The CEO can=t make it happen by memorandum. He can=t demand it because it involves culture and it does
require, at some level, people who have the strength to get over their
inherited passivity and skepticism and to learn how to speak and act like
themselves and with mutual respect for others.
That takes time and patience and courage, and so we have to have all
those things, and particularly respect for others.
The
other asset we have is that this idea, depending on how it gets expresses,
really has no fixed ideological origins.
Depending on how you explain it to somebody, they will think you=re a dangerous ALefty,@ or they will think you=re a hard-headed business manager and, actually, you may be both, or
one or the other. I see Chris Mackin
back there, my friend, and he=s a consultant
to businesses and labor unions on helping them get started. We had a conversation a while back and he
was describing some of these business guys he had worked for. They got into it for different reasons, a
tax break, yes, and because it seems smart for business, and whatever. Chris
said some of them are what you might basically call Ahumanist-populists-capitalists.@ I love that
phase because it=s a kind of triple oxymoron. They just don=t go together.
But you=ve probably all have met some, right? You know they exist. Some of them are in the room. We need to get those folks together with the
labor folks, and with the social activists and church people, and smart
economists, and build a kind of net that travels.
The
good news, and you are going to hear something about it, is that this idea is
alive in the rest of the world as well.
I saw employee-owned companies in Poland struggling to survive against
shock therapy and other US introduced remedies. China has been exploring the
idea, and South Korea and South Africa.
Whatever stage of development they may be at, this is a path that a
developing country can build in at an early stage. You have to be patient because many of those countries don=t have much democratic experience, let alone
industrial development, but it=s a portable
idea, and I think can make a huge difference ultimately in the governance of
countries as well as the global system.
I
think of some of you, maybe all of you, as pioneers at this stage. And I really use that word sincerely because
you=re plowing new ground, or at least ground that=s utterly unfamiliar to most Americans and to most people
around the world. They don=t understand capitalism very well, but even if they
do, they don=t grasp that this is possible and actually exists and
is actually functioning successfully in many settings, so it=s a big educational chore.
I=ve
been writing on and off about the idea for nearly 25 years. When I was young reporter, I used to think,
did I get the facts right? And then
people would react to a story and they didn=t
quite get it and I would blame them for not being astute enough to understand
my brilliant prose. The older I get as
a reporter, the more I realize, I didn=t
get this right. The facts were correct, but
I didn=t write it in a way so that people could understand
what I was saying. And this is one of
the big, big challenges you all are up against too. If this powerful idea is right, why has it been cloistered and
sequestered for so long in this society, not to mention elsewhere? And that=s a
really tough question to answer. I don=t really have a quick, glib answer for it, but how do
you explain this idea in a way that connects with the potential army that is
out there ready to march for it? And
that=s why I want to turn now to the case for ownership and
talk about that a little bit, maybe in the hope that it can help you all sort
out some of what you hear because you will hear different versions of why this
matters and why it matters to globalization.
Arguments
for broadening ownership
I
see three distinctive and really different arguments in behalf of
ownership. I=m going to just run through those and I apologize
upfront because some of the adherents and scholars of all three are in the
audience ane they=re going to groan and cringe as I crumple their
eloquent argument and analysis into
over-simplified thoughts.
The
first one, I would say, is the natural-rights argument and it draws powerfully
from David Ellerman, who is in the back of the room. Essentially, it says, workers must Aown their own work@ as a natural
right of their human existence. Work
involves inalienable qualities of self, including personal responsibility for
one=s actions, that cannot be separated from a person,
even if he bargains them away. In the present employment system, workers
typically, not everywhere but typically, are prohibited, often quite harshly,
from exercising their natural rights under the Constitution, never mind under
the Creator, and from participating in decisions affecting them in their
lives. We can see this easily enough in
sweatshops but the condition is general.
It
sounds extreme to suggest that the same power relationship exists in the
American employment system, or Europe=s
or Asia=s, but if you think about it, typical workplaces
operate on the same principle, though less brutally. Eeven some of the very advanced work places
essentially do the same thing. I had a
conversation with a line worker at the Toyota factory in Georgetown, Kentucky,
probably the most efficient auto assembly plant in North America (he will be in
my new book). He talked about the grinding, dangerous, cruel Asweatshop@
circumstances of keeping up with the line in that factory. He talked about the
repetition of severe injuries and felt personally guilty because he was a Ateam leader.@. It was quite chilling, and surprising to
me.
If
you step back further, you see that some of the same confinement is now
introduced to professionals. Engineers,
doctors, other skilled professionals, middle managers in companies have been
commodified themselves, in a way. They
are treated as inputs, as inanimate things, without voice, and in many cases,
without brains. Elaine Bernard, who
runs the Labor Studies Program at Harvard, said it as powerfully as I=ve seen it said anywhere:
AAs
power is presently distributed, workplaces are factories of authoritarianism
polluting our democracy. Citizens
cannot spend eight hours a day obeying orders and being shut out of important
decisions affecting them, and then be expected to engage in a robust, critical
dialogue about the structure of our society.
Indeed, in the latter part of the twentieth century, instead of the
workplace becoming more democratic, the hierarchal corporate workplace model is
coming to dominate the rest of society.@
If
you think about that, you know it=s
true. I said I was drawing on David
Ellerman=s work. He is
an economic philosopher on one level and a valiant humanist on another. I hope you take that as a compliment,
David. And what he does, among other
provocative exercises, is to trace work relations from the status of slavery to
serfdom to the modern employment system.
What he discovers is that we=re
not quite free yet, not in any profound sense, given the endurance of the Amaster-servant@
relationship in the workplace. It
endures in ways that people are more or less compelled to accept to make a
living, but that reduce the quality of their own being. The fact that people have accepted those
terms for centuries does not make them legitimate. It means simply that people have never successfully been in a
position of power to change them -- to rebel and to recreate new, more humane
conditions.
David
plays some provocative and, I think, ingenious mind games with the
orthodoxy. He goes back and quotes some
economists attempting to explain the legitimacy of this modern arrangment.
Remember now, workers originally recognized the illegitimacy. In the 19th century, when they
left farms and moved into industrial production, they commonly referred to the
system as Awage slavery.@
But that=s over -- we don=t
have slavery because the 13th Amendment abolished it. Yet there is still this tricky question: who
owns your life once you enter the factory door?
Ellerman
refers to Alfred Marshall, the preeminent economist of the 1920's, who
explained it thus:
AWorkers may not be bought and sold; only rented and
hired.@ Then Ellerman
turns to Paul Samuelson, author of the standard textbook for modern Economics
101, and Samuelson sticks to the same lame distinction: ASince slavery was abolished, human earning power is
forbidden by law to be capitalized [bought and sold as property]. A man is not even free to sell himself; he
must rent himself at a wage.@ As I hope you can see, this legal
distinction is not very comforting because it still allows the employer to
treat human labor like property and indeed that is how most employers treat workers. They are rented machines, without free will or free speech or
responsibility for their actions.
Ellerman=s central argument is that -- whatever the law claims
-- this is still a lie. And it is still a violation of our natural rights as
human beings. A human being is not a
machine, not an inanimate input for production, but a responsible being who
cannot be alienated from his or her responsibility for personal actions -- even
by choice. Here is how Ellerman makes his
point: AGuns and burglary tools, no matter how efficacious or
productive they may be in the commission of a crime, will never be hauled into
court and charged with the crime.@ Why?
Because they are machines, without human responsibility. Conversely, Ellerman observes:: AA hired killer is still a murderer even though he sold
his labor.@
These
are deft illustrations of the fundamental human reality -- we all recognize the
truth of what he=s saying. Yet
capitalism and the modern employment system deny this reality. So does law. So do all the economic institutions and government agencies that
surround us. So it=s not going to be an easy task to persuade them
otherwise, but it=s essential to the potential for human existence that
we try. This inherit lie about human
nature and our inherent rights is convenient, of course, to the organization of
capitalism, in which investors and insiders capture the surplus value, not the
workers. David says the system is thus
a lie as well. He wrote: AThe Capitalist, like the slave owner, has used a
legalized fraud which pretends the worker is an instrument to arrive at the
position of being tje >owner of both instruments and production [labor and
capital] so that he can then make a legally defensible claim on the positive
product [that is, full title to the workers=
output and the profit and appreciating value of the enterprise].@
I=ve dwelled on this deeper humanist argument for
employee ownership because I think it=s
less familiar than some of the other
rationales. I also think it is probably
the most resonant for the world, not just the United States and advanced
economies. It really does speak to the
fundamental power relationships in capitalism and their consequences for human
existence and societies. Capitalism is about more than creating wealth. It is about some people claiming power over
other people=s lives. That, in a true sense, is what we are trying
to change.
The
logical conclusion is that, to be fully human and free, workers must own their
own work, one way or another, in a democratic firm. As Ellerman puts it and Owen Young envisioned 80 years ago, Alabor hires the capital, instead of capital hiring
labor.@ And, roughly
speaking, that is the transaction in an employee-owned company or in a cooperative
or in partnerships. Think of a law firm
-- exploitive engines themselves, if you know anything about law firms-- but
the partners in the law firm hire the capital.
They borrow the money to rent the buildings and hire other workers and
they share the profit among themselves.
No absentee owners. Now they don=t
share it with the associates whom they work like mules all night long, but that=s another reform we won=t worry about today. The
essence of the typical law practice is exactly what we=re talking about here. If it works for lawyers, it can=t be all that radical, can it?
The
idea of sharing the returns among all of the company=s participants brings us ato the second great leg of
this stool -- the arguments of Louis Kelso.
I
had the honor, and dizzying experience, of meeting Louie Kelso 25 years ago,
thanks to the good offices of Norm Kurland, and Kelso spent several long,
brain-numbing sessions with me trying to get me to understand, not just what he
was saying, but how the economy really works. He offered a very different perspective and I was so
uneducated. It=s amazing what he taught me and I became deeply
indebted to the strength of his intellect as well as his ideas.
Louie
Kelso was an investment banker and he focused on the macro level: big
capitalism and its flaws. What he saw
was that American capitalism -- this was back in the 1950's -- was leading to
crisis, one that has considerable similarity to the crisis global capitalism is
facing now. He argued that, as
technology B Aautomation@ in those days B
displaced or marginalized labor, the system would face a crisis of demand and
huge social distress for the people.
From his point of view, that meant more pressure on the welfare state to
clean up after capitalism. Since Kelso
was really at heart a Libertarian and loathed government intrusions in the free
workings of the market place, he could see that keeping government out of the
economy was impossible to achieve without democratized capitalism B capital ownership.
And that means ownership of the income-producing capital assets, better
known as stock shares. .
The
corporation is a principal engine of inequality. And this built into the design of any business that=s owned by a relatively few people and absentee
stockholders. The inequality does not flow simply from the wage differentials
between the top and the bottom, which are outrageous to be sure. What drives it fundamentally is that a the
iinsiders aggregate the surplus value produced by the employees in the firm and then distribute that surplus
value to the owners, many of whom are
utterly distant from the company=s
actual functions.
Kelso=s solution: Everyone in the firm must be an owner -- a
shareholder as well as a worker. Thus,
everyone would enjoy two streams of income.
If the wages were under pressure, he would still have a substantial
supporting stream of income from his capital assets. The two together would allow a broadened equity in the society
and insure the neccessary demand to sustain the economy. Out of that insight, Kelso invented the
trust mechanism called ESOPs that we=re
all familiar with -- more or less a democratized version of the LBO (leveraged
buyout) that enables employees to gain ownership of their company.. Kelso has much more profound, complex and
controversial theory and I=m going to skip
over it here to the pain of adherents, probably. There are a lot of doctrinal arguments among these different
groups about what is the right path to ownership, what works and what doesn=t work. Frankly I am trying to evade those in this discussion. I do want to make the point that his original
thinking and his invention of the trust
arrangement really re-opened the door of history for us and allowed the
beginnings of a substantial revival of worker ownership in this country. That
is an extraordinary contribution and generally unacknowledged so far. But I
have no doubt that some day -- some day -- Kelso will be in the pantheon of
great economic thinkers.
The
third argument for broader ownership is
simpler, perhaps more familiar. AWhen employees are owners, the company is more
efficient, more productive, more profitable.@ As it happens, there=s a growing body of research -- and I=m sure you=ll
hear about it, so I don=t need to go into it -- that confirms this
assertion. ESOP companies do a better
as companies. Call it the argument for the Abottomline.@
Why
should anyone be surprised by that? Of
course, people are likely to act more effectively at work when they have a real
stake in the outcome. Of course, people
take more responsibility for their actions, and maybe offer innovative ideas
free of charge to the managers, when they are treated with respect and possess
real voice and influence. So, in that
way, it=s perfectly logical. I don=t need to point out again that this result -- workers
with voice and ownership produce better -- is the opposite of the operating
principle in most enterprises all over the world, most especially the largest
multi-national ones.
The
Abottomline@
argument makes me a little nervous, however, because, if we get to the day
where a firm is owned by insiders who are all the workers and employees, and
maybe with community invested in the firm as well, I don=t want to prejudge how they will decide things. Of course, they need to make a profit. But they may have a different idea of what
is profitable and what is not profitable in the company=s behavior. They may choose different goals than the
Wall Street Anumbers@
guys and conventional economic practice -- both of which are often deeply
destructive. I want those worker-owners to be as free as possible to explore
new approaches -- new accounting of profit and loss -- because athose changes
can have a much deeper impact on how capitalism functions. That=s
way off there in the future, of course but it=s part of this glorious
threshold I see.
Reinventing
economic life generally happens when you have new participants whose values can
reshape the enterprise in new ways.
I am talking about everything from ecological values to shared wage
systems to the obligations and accountability to the community where the
factory is located. I think the
prospects are enormous. I should add
what we all know, but what needs to be candidly accepted. Workers are not angels either. Neither are communities. They=re
human beings. They make mistakes. They are fallible. But I think it=s obvious to
most of us B we need to explain it to other people -- that when workers are alligned with their
community values and interests, with their
family values and aspirations, you are creating a basis for democratic
decision-making and, if you believe in democracy, that means you will get, on
the whole, better, wiser decisions.
Another
quality in that circumstance is that,
if the manager is responsive in some democratic fashion to the people he
is supervising, you will get a different kind of supervision. If we had an
economy in which worker ownership and democratic relations within the firms
predominated, we could not possibly have had the excesses and extremes of the
last 20 years. I can=t imagine the employees would have allowed such
greedheads to run things and to execute such brutal deviations from human norms
and values. While I accept that workers
sometimes get things wrong and so do communities, can anybody imagine that the
workers would have done any worse with their companies than some of these
egotistical CEOs we=ve been reading about? I can=t.
My
discussion has largely been abstract.
Let me close with a concrete example, one of the reasons I am
fundamentally optimistic about our prospects.
I have seen it happen, as you have, and not by government edict but by
people taking charge of their own circumstances. I will talk a little about Joe Cabral, who is one of my favorite
characters in my almost written book. I
wish he had been able to make it to this conference. He is president this year of the ESOP Association and he is CEO
of Chatsworth Products, Inc. in the San Fernando Valley of California. He was trained as an accountant, not as a
political philosopher, but he says this as well as any of us can.
Chatsworth
was created in 1900 when Harris Electronics, in the big corporation=s typical re-strategizing exercise, came across this
little subsidiary that makes hardware for the high tech industry -- those metal
frames and casing for stacking computers in the IT centers -- and it was
profitable, but it didn=t fit the company=s
strategy. It was low-tech metal bending
and Harris wanted to se seen as high-tech, so the strategists said, Adump it, get it off
the balance sheet.@ Sell it or shut it down, it=s too small to worry about.
Joe
Cabral and some of his fellow managers were outraged. Because they their real value. AWe have a good operation here.
We=re making money.
We know how to run it.@ Harris found no buyers because Chatsworth
was too trivial to interest major electronics companies and Harris was ready to
close it, sell off the machinery for pennies on the dollar. Cabral and the employees won the right to
save it if they could. They pooled
personal savings and hustled around for capital -- a bank loan to finance the
ESOP takeover -- and got turned down everywhere. They finally came to the
National Cooperative Bank in Washington -- God bless it B and got the loan, bought the company and have been
running every since, quite profitably.
Joseph
Cabral is one of the great evangelists for employee ownership. We should just
put him on the road and have him talk to PTA=s,
legislators, business owners, unions and communities because he=s not a mushy, squishy reporter or academic
philosopher or anything like that. He
knows what he=s talking about from the perspective of a hard-headed
manager. Here=s what he said about Chatsworth=s Afamily@ ethos:
AEverybody
is sharing in the wealth they=re
creating. That=s our fundamental philosophy: we=re all in this together. We=re not just doing this for outside shareholder; we=re doing it >cause
we are the shareholders. In most
companies, you want to do well in order to have a job or career advancement,
but you=re basically in it for the paycheck. In CPI, we created this wonderful foundation
of ownership and people are totally aligned with the success of the company.@
He
went on in some detail about how they are going through the storm of the
meltdown in Silicon Valley -- their best customers are all hurting -- and so
they=ve had to lay off people for the first time, after
struggling to avoid it. But people
walked out with good checks -- six figure checks. The value of Chatsworth shares,
privately held by all the employees, rose in ten years from $4 to $121. .
Employee-owned companies are no more immune to marketplace cycles than
other enterprise, but they may deal with the consequences in quite different
ways (Did I mention that Chatsworth has
2/3 minority employment? Joe is Portugese and counts himself among
them).
AOkay,
it=s good for you guys,@ I said, Abut why does ownership matter for the country?@ And he said, AThe
way our society has rolled out, the wealth its created through that vehicle
called capitalism ends up in too few hands.
The entrepreneur who is fortunate enough to be there at the start ends
up really receiving a disproportionate amount of the wealth and all of the
working folks who enabled that success to take place share in little of that
wealth. So we end up in a society with
a pyramid structure where the top 1% owns 90% or something like that. It=s
so disproportionate that in my heart, I=d
say that kind of ownership structure is not sustainable. At some point, capitalism is going to go
bust because we haven=t done right for the folks who have actually created
the wealth.@
Not
a bad account of what we feel. I pushed him a little further: why exactly
does this happens? And Joe said, AWell, truthfully, in my mind, it=s greed.@ He got really rolling then,. It=s about power. The guys who have the power and money
don=t want to share it.
We=ve got to take them on. That is hard politics ahead but one can envision a very
interesting alliance -- bringting together people who used to be on opposite
sides and working for mutual objectives.
I
haven=t talked that much about the rest of the world, but I
don=t think it takes a lot of imagination to appreciate,
when you think of those three arguments for ownership, why this is so relevant
to other countries, especially developing countries, who are really
industrializing for the first time. As
you probably have heard, or already know or will hear, there str some doctrinal
tensions among these three viewpoints and I urge that participants of all three
schools, all of whom are friends of mine and I listen to them and learn from
them, to accept those tensions because these three different arguments are the
strength behind this idea. It is true,
we haven=t yet figured out how to put this idea on the road and
really make it work in the mind and soul of this country. Let=s
admit that. But I think it=s these three different viewpoints explain why this idea attracts this robust
diversity of people -- everybody from Chris Mackin=s Ahumanist- populist- capitalists@ to labor leaders to the social activists to the
business men who just think this is good for business. Let=s
hang onto those big ideas because they all work for us.
The
poorer countries of the world, ironically, may have an opening and an advantage
here that we don=t have because they=re
not dealing with an established system
that is deeply entrenched. They=re starting
from scratch, usually in hostile political circumstances, but at least they are
inventing capitalism from the ground up, or trying to. I think at a minimum, anything that allows
people in those countries, including very poor people, to see the practice of
workers exercising voice in the workplace -- standing up and expressing their
views as co-owners -- is a powerful step toward democracy and maybe a necessary
building block.
A
lot of us understand, I think, that this country of ours preaches relentlessly
to the rest of the world to copy our democracy, while America itself does not
have an authentic, functioning democracy.
I don=t argue that it one day did and somehow lost it; but I
do argue that democracy is a transcendental story or ought to be and that we
have stopped moving upward, maybe even have fallen a few steps backward. People are not represented authentically in
the governing system, they know it -- that=s
why a lot of them don=t bother B
and I do believe that ownership is a crucial ingredient for helping Americans
themselves to relearn what it means to
act as a citizen and to assume that
they are capable of self-direction and fully capable of participating in the
decisions that govern their lives.
That=s what
democracy is. It=s still a radical idea, isn=t it? If you
look around America, we are not there yet, not even close. So, I believe -- with Elaine Bernard and
others -- that the road to accomplished a genuine democracy begins at work.
greider ####